The Effects of State Performance Funding Policies on Student Debt and Repayment

Performance-based funding (PBF) policies are an increasingly common way for states to tie funding for public colleges and universities to student outcomes. Yet amid growing concerns about student debt, the potential exists for PBF to affect student debt and ability to repay loans in both intended and unintended ways. In this paper, we use the first comprehensive dataset of PBF policies to examine the effects of PBF on debt and repayment outcomes. We find evidence that PBF policies increased the debt burdens of students who left college without a degree while not affecting the debt of completers.

Robert KelchenNovember 29, 2021Robert Kelchen, Justin Ortagus, Kelly Rosinger, Alex Cassell

New Evidence on the Evolution and Landscape of Performance Funding for Higher Education

This study draws upon the first detailed longitudinal dataset on performance-based funding (PBF) to document the evolution and current landscape of PBF in American higher education. We show that while PBF has become increasingly common, states have experimented with adopting, abandoning, and re-adopting PBF over time. We also find a new wave of PBF adoption occurring in the 2010s following the Great Recession. However, PBF remains a relatively weak policy lever with a small share of funds at stake in most states and some states not funding PBF even when it exists in legislation. Equity considerations vary in the student groups they include and less than half of two-year and three-quarters of four-year PBF systems include race when allocating performance funds. Our findings complicate some common characterizations of PBF and offer new insight for researchers examining how PBF policy design shapes student and institutional outcomes.

Elise GrinsteadNovember 24, 2021Kelly Rosinger, Justin Ortagus, Robert Kelchen, Alex Cassell, Lynneah Brown

Investing in the Workforce: The Impact of Performance-Based Funding on Student Earnings Outcomes

A growing number of states use performance-based funding (PBF) systems to tie appropriations to student outcomes. Yet while many studies have examined the effects of PBF on enrollment and completion outcomes, no research has considered whether PBF affects post-college outcomes. This is of particular importance as more states directly incentivize colleges to improve student earnings and have students major in high-demand fields in PBF systems. We used the first detailed longitudinal dataset of state PBF policies to examine the effects of PBF on student earnings and found modest positive effects for four-year universities and generally null effects for community colleges.

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